3 Reasons for Freelancers & Startups to Run a Company

 When you initially start out as a freelancer, the idea of incorporating your business seems far away.

As a Hong Kong company service provider, we can promise you that being the boss of your company has numerous benefits over doing business under your own name, such as as a single proprietor or partnership.

Here are three important reasons why freelancers should start their own businesses. The following information is equally applicable to startups as a group of like-minded individuals.

1. You can shield yourself from unrestricted personal liability.

Consider the chores you're completing for your new firm. Is there a danger that your actions will go wrong and cause injury to the other? Unfortunately, you (and your partners, if any) bear the primary duty; you are responsible for all consequences; and you are exposing your assets to an unlimited risk of losing not only your money but also your debt.

To protect yourself from potential commercial liability, you should form a Hong Kong private company limited by shares, or simply a Hong Kong company.

You become a shareholder of your company when it is registered, and you are only liable for the money you put into it. The amount of company stock you own determines the size of your investment.

Following incorporation, your firm can enter into contracts with third parties in its name, making your company the "person" who will be held responsible. Someone files a lawsuit against your firm, but not against you, in the event of a disagreement. As a result, incorporation can provide you with the most basic tool for protecting your assets from endless liability.

However, if a firm does an illegal act, the director and shareholders are personally accountable for any consequences. Apart from the aforementioned circumstance, forming a company is the first and most common step in starting a business of any size.

2. You can divide your company's ownership, controlling authority, and assets among other members (such as founders).

If you're putting together a company with a group of people, you should incorporate as soon as possible. Because a company can allow you and other members to legally define how the business collaborates with internal and external parties, such as investors for fundraising and specialists as your to-be project managers, a company can allow you and other members to legally define how the business collaborates with internal and external parties, such as investors for fundraising and specialists as your to-be project managers. In other words, if you establish and run your firm as a corporation, you can better manage the expectations of those around you.

3. By declaring your business revenue and costs under your company, you can get additional tax benefits.

To maintain its status as a "low-tax worldwide business center," the Hong Kong government has implemented a new tax reduction scheme for all businesses.

For your information, a Hong Kong company's first HK$2 million in taxable income (after Profits Tax) is taxed at an annual rate of 8.25 percent (16.5 percent for the remaining amount). Furthermore, the Hong Kong government has a history of providing large tax reductions to both business and individual taxpayers (a set rate discount on the final tax payment) (i.e. taxpayer of Profits Tax and Salaries Tax, respectively). Hong Kong, on the other hand, does not levy Capital Gains Tax or VAT.